Energy Policy

Montana Gov. Schweitzer (D) makes the pitch for coal-to-diesel plant

Can coal play a part in easing U.S. dependence on foreign oil? Montana Governor Brian Schweitzer (D) thinks so, and is planning a coal-to-diesel facility for the state. During today's OnPoint, Gov. Schweitzer talks about some of the financial incentives that Congress and the White House can provide in order to help develop this alternative fuel, and also addresses the issue of carbon dioxide emissions. Plus, Schweitzer -- a Democratic governor in a state that voted heavily in favor of President Bush during the 2004 election -- also talks how Democrats can use energy issues to their advantage this fall.


Brian Stempeck: Hello and welcome to OnPoint. I'm Brian Stempeck. Joining me today is Governor Brian Schweitzer of Montana. Governor thanks a lot for being here today.

Brian Schweitzer: Great to be here.

Brian Stempeck: Now you've been pushing a lot towards coal to liquids technology, basically a way to take coal and turn it into fuel for cars and trucks. Talk about what, exactly, you're proposing for Montana.

Brian Schweitzer: Well I'm just proposing this for the entire country. We are dependent on foreign oil. You heard the president say that and it's gotten worse over the years. Twenty-five years ago I went to Saudi Arabia because the king of Saudi Arabia and the royal family, they heard American farmers say a bushel of wheat for a barrel of oil. Now that was after the last oil shock in the late 70s. In 1980 I went to Saudi Arabia along with a lot of other American engineers. And within six years we made Saudi Arabia self-sufficient in food. In fact, they were exporting food. So you see even a Bedouin in Saudi Arabia understood that you can't have some other country controlling your domestic policy and your international policy. Back in the 70s we were importing 48% of our oil. Today it's 60%. Who do we import it from? Well we import it from my neighbors to the north in Alberta. We can trust the folks in Canada, friends in Alberta. They're a great source of energy. But then it's Venezuela. It's Saudi Arabia. It's Iraq, Iran, Libya, where I also worked for a bit of time, Algeria, Nigeria, Angola and some countries that end with stan. You see if we're going to depend on foreign countries for our oil supply they will have an influence on what our domestic and international policy will be. And that is not acceptable. Now, in 1923 a couple of German scientists, Fischer and Tropes, developed a system to convert coal to liquid fuels. During World War II the Germans used that technology because they lost the access to Romanian oil and Middle Eastern oil. The South Africans have been using this for 40 years. They've been producing 200,000 barrels of diesel and aviation fuel with coal. So you see people are going to ask as they watch this right now, wait a minute, if you can do this why didn't we do it before? Well, in 1953 America had been working on it since 1949 and we were producing a thousand barrels of gasoline in Missouri using North Dakota lignite coal. But that's when the Saudi Arabian oil became available.

Brian Stempeck: Right.

Brian Schweitzer: When we created Iranco the four major oil countries partnered with the royal family and they have the exclusive extraction rights to the Saudi Arabian oil. Oil's been cheap. Many of the people that are listening to this, they don't remember that before 9/11, go back to the previous 10 years, the average price of oil was around $18 a barrel. This technology costs minimum $30 per barrel. If the price of fuel stays high, if the price of oil stays above $30 a barrel, we can make it cheaper with this process.

Brian Stempeck: As you mentioned this is happening in South Africa, other countries have done this. We don't really have much in the United States. I know that there's a proposed plan in Pennsylvania. What will it take specifically, if you're talking about incentives coming from Congress, from the White House, from the states, to get a plant built in Montana?

Brian Schweitzer: To start with understand this, I think it's private industry that builds these things. If we're dependent on Congress to build these plants we're all in a world of trouble. But what Congress has already done is they've put some incentives, some tax incentives and some loan guarantees in the energy package. So what we're working with is the big companies, companies that have this technology. General Electric, they have coal gasification technology. The Shell Company, gasification technology. Southern Company, which is a utility in the southeastern United States, they have gasification technology. All of these companies, some coal companies, some fuel companies are interested in developing this. We now have a package that we can start coalescing around. The most important thing that we needed was the world to come to the conclusion that the price of oil is not going below $30. We would like the US government to step in and say we will floor the price at a dollar a gallon. When I say $30 a barrel that means we need to have a dollar a gallon for diesel or aviation fuel to make this a bankable project. Right now Congress isn't willing to do that. The Department of Defense isn't willing to do it. They're not willing to step up and say we use 600,000 barrels a day. We will floor this price. So that means that we're going to have to work with private companies. What we're doing is we're coalescing around private industry, the big corporations of America that are interested in energy self-sufficiency and making a buck. They're interested in this technology right now. But those members of Congress, they have to make sure that the appropriations are there to match the energy bill. Because in order to have a bankable project these folks on Wall Street have to recognize that there is a loan guarantee, but there has to be an appropriation that is a percentage of what the risk factor might be. And that percentage might be 10 or 15%, so if you're borrowing say $5 billion that means you have a loan guarantee of 4 billion. If it's at 10% they need to move $400 million as that appropriation. So there are some things that Congress still needs to do and we fully expect them to do it.

Brian Stempeck: One of the biggest issues that environmental groups have raised as a problem with this project is, you know, a lot of the conventional pollutants; it's not a total- you know, totally bad for the environment. When you're talking about carbon dioxide this is a massive amount of CO2 that's going into the atmosphere. I know you've talked about a potential solution to that and I wanted to hear what your response is to the fact that this is really going to increase global warming.

Brian Schweitzer: Well, when you produce synthetic fuel, it's actually cleaner than the oil industry. Now coal itself is a dirty fuel.

Brian Stempeck: Right.

Brian Schweitzer: If you just ignite this coal and run it through a smokestack there will be mercury, there will be sulfur and a large amount of carbon dioxide. But you see we're not talking about putting anything up the smokestack. This system that converts coal to a liquid is done in a pressurized chamber. You're effectively removing the energy and leaving the bad stuff behind. So you can remove 100% of the mercury, 100% of the sulfur and the resulting carbon dioxide, because there's a lot of carbon in this coal, you're able to pull that separately out of the process, pressurize it, put it in a pipeline and pump it right back into the earth. Now, you think this is space-age technology? Well come on out to North Dakota. They've been doing this for 10 years in Beulah, North Dakota where they have a coal gasification plant. And the CO2 is pumped right back into the oil fields. This is called enhanced oil recovery. Now understand that if your oil is say 5000 feet deep, what you do is you drill back down to that oil bearing rock and you inject the carbon dioxide. That carbon dioxide is under high pressure. What it does is it increases the pressure in that zone. And the oil is pushed towards your drill stem that extracts it. Carbon dioxide also will increase the viscosity of the oil. It makes it slicker, so it moves it through the rock. This is well understood technology. And the oil industry actually pays for carbon dioxide for this enhanced oil recovery.

Brian Stempeck: At the same time though when this has been done in the past, it's been done as you mentioned to get more oil recovery. Not necessarily to keep the CO2 in the ground. I mean I know there's testing underway right now to make sure it actually stays below ground. This is a very cutting edge technology as well. Is there a danger in depending too much on these things? You're talking about gasification, carbon sequestration, coal to diesel. These are all very cutting edge technologies. Do you think it's really viable to do this on a large scale?

Brian Schweitzer: Oh, you bet. I mean as I said this technology was developed in 1923. The Germans used it 50 years ago. South Africans have been using it for 40 years. We are using carbon dioxide in enhanced oil recovery around the world. Yes we can sequester this carbon. Do we need a protocol to make sure we do it right? Yes. Can we continue to pump this carbon dioxide into limestone and salt beds around the world? Sure. But who's going to pay for it? Right now we have the oil industry, who is willing to pay to bring this carbon dioxide in so that they can get more oil. We'll develop some technology in these areas, but in the future there needs to be public policy that will somehow tax for carbon or pay to push that carbon right back into the earth. We can do this, but we need the cooperation of Congress. Now the states are working together on this. The coal and energy producing states, we're already working on protocol. The governors are working together. We need Congress to step up and be leaders.

Brian Stempeck: At the same time you're promoting coal to diesel you've also talked a lot about, in the past, about bio diesel, about wind power, about different alternative forms of energy. By supporting coal so much aren't you undercutting the market for these other types of energy?

Brian Schweitzer: Not at all, 60% of the fuel that we burn is imported. We're using over 6 1/2 billion barrels of oil per year and about 4 billion of that is imported. We've got a lot of work to do. Now I've been talking about bio diesels, this is safflower, this is camolina. You can use soy beans and other crops. But I think that all of the biofuels, with current technology, only gets us to about 20% of our fuels portfolio. Conservation, energy efficiencies, we can decrease our consumption by maybe 15 or 20%. That still leaves us 30 or 40% short. That means we need to look for another source. Some people say that the planks on the bridge to the future energy economy, whether that's hydrogen or something else, ought to be imported oil. I disagree. We cannot count on those trading partners. Some of the money that we are sending to some of those countries around the world is ending up in the pocket of terrorists who would like to destroy our way of life. We've got to wean ourselves from that oil and invest that money right here domestically. We could create tens of thousands of jobs. And we would challenge the ingenuity and technology opportunities of American people. We will create jobs. We will create new technologies that we can export around the world. This is good for our economy. It's good for the world.

Brian Stempeck: One last question for you real quick because we're running out of time. When you campaigned for election 2004, a Democrat in a red state, a rare thing for Montana, for you to win the governorship there. What advice would you have for Democrat candidates running in 2006 for Congress, for gubernatorial elections around the country, when it comes to energy in particular and focusing on those kinds of issues?

Brian Schweitzer: You need a solution. You can't just say that we're all wrong. You can't just say, well, how did we get to 60% imported oil? You've got to say, look, what is the fuel portfolio that we're going to use? Yes bio diesel. Yes ethanol. We like wind power. Those are all great. We need to work towards solar power. But we need more. And that's why this clean coal technology is a solution, not just for Democrats and Republicans, for the rest of the country.

Brian Stempeck: Governor, thanks so much for being here. We appreciate it.

Brian Schweitzer: It's great to be here.

Brian Stempeck: I'm Brian Stempeck. This is OnPoint. Thanks for watching.

[End of Audio]



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